Only 12% of buy-to-let investors can expect to receive rental income in excess of £800 a month, according to a private sector tenant demand survey conducted by Savills Private Finance.
According to the broker, this highlights the limited depth of demand for rented property in the upper rental bands, especially outside London.
The finding is one of many revealed by the survey, which gathered data from 12,500 tenants across the UK. It found that flats and terraced houses are the most common properties rented, with tenants coming from a broad cross-section of income levels.
Access to transport and a location just outside a city centre remain the most important aspects for landlords to consider. The survey also found couples or cohabiting adults in their late 20s or early 30s with an average income of £25,000 are the people most likely to privately rent.
According to Savills, investors need to gain an understanding of why tenants move on if they want to minimise rental voids. The most common reason for tenants moving to their current residence was found to be job-related. A total of 23% of tenants said moving into a larger property was the main reason for their move, 16% moved to live in a better location, 14% stated family and personal reasons and 12% moved to their existing residence as a result of divorce or separation.
The survey found two-thirds of tenants intended to move to new accommodation in the next 18 months, with less than two-fifths intending to stay in the private rented sector. A total of 61% of respondents said they would move into owner occupation, 33% said they intended to carry on renting, 3% said they would be moving into social housing and 3% did not know.
Mark Harris, director of Savills Private Finance, said investors could benefit from taking note of the survey results.
‘Buy to let remains an attractive investment proposition with interest rates at their lowest in a generation. The findings of the research are clear. Potential landlords need to do their homework, enabling them to target the most lucrative rental property and enhance returns on their investment.’